Interview:Colombia
comes out of the shadows
......President
Álvaro
Urbie remarks

Interview:
Colombia Vice-president Francisco
Santos

Interview:
Sigfredo Valle Courtade: UNILEVER IN COLOMBIA

Colombia comes out of the shadows

Note: Courtney Fingar is a
reporter for fDI (Foreign
Direct Investment-magazine). The Three articles shown below
were produced by the
renowned Financial Times group,
fDi s the premier publication
for business of globalisation, and is
published on a bi-monthly basis with an
ABC-certified circulation of nearly
15,000.

December 05, 2006

Colombia has been fighting to prove that it is
a safe and worthwhile investment destination
and has now put itself firmly back onto the
investment map. Courtney Fingar reports
from Bogotá and Medellín.

Colombia is a country where beauty is
pervasive. The world's second largest exporter
of flowers, its stunning roses add a touch of
glamour and flashes of brilliant colour to
local hotel receptions, restaurants and office
buildings as well as dispersing their beauty
to appreciative international recipients. Its
natural areas – mountains, jungles, beaches
and much else in between – are breathtaking.
Yet when local men and male visitors speak of
the gorgeous scenery, with a sly wink, they
are more likely to be referring to the
renowned beauty of Colombian women.

For decades, Colombia's ugly side overshadowed
the beautiful, and the ugly face was the one
most often shown to the outside world,
courtesy of a steady stream of news reports of
kidnapping, murder and drug trafficking. Still
today, even though the news trickling out is
more positive, tell people you are going to
Colombia and they will look at you as if you
have a death wish.

Dangers remain; backsliding is certainly
possible; a series of car bombs in Bogotá in
late October and early November rattled
nerves. But the darker forces have retreated
into the shadows and the warm light of hope
now flickers across what was until recently
the Western world's most violent country. In
much of Colombia, for the first time in recent
memory, life is beautiful again. The country
is safer and more optimistic than it has been
in many people's lifetimes.

Security programme

The 'democratic security' programme of
president Álvaro Uribe, re-elected in May
after the constitution was amended to allow
him to run for a second term, has succeeded in
restoring government authority over patches of
the country formerly threatened by guerrilla
and paramilitary groups. On the strength of
security improvements, the economy is growing,
purchasing power is rising, unemployment is
declining, exiles are returning and capital is
flowing in.

"My message to international investors is that
Colombia deserves all their confidence.
International investors can trust in
Colombia," said the president "We are making
great efforts to create stable and transparent
rules and to create the conditions for our
country to have sustainable economic growth
that will not be less than 6%. We are totally
open to international investors and we
consider them necessary partners to create
social cohesion in Colombia."

Mr Uribe is the man behind Colombia's dramatic
about-face. "He is doing real things for
Colombia – there has been no one like him,"
says one security analyst familiar with
Colombia. "The risk factors have certainly
been reduced in Colombia because of his
fingerprints."

Another, Daniel Linsker of Control Risks, says
there have been "exponential" improvements in
security under the Uribe government. The
administration's single biggest achievement
"has been to return trust to Colombia", says
vice-president Francisco Santos (see
page 23 ).

Mr Uribe's political skills were on full
display at an international mining show in
Medellín in September, where he took questions
from the audience, routinely calling cabinet
officials to account and pressing them for
answers and results. He spent nearly three
hours on stage at the event, presiding over
discussions like a judge in a civil dispute or
– more accurately – a CEO at a board meeting,
listening to grievances, admonishing when
necessary, delegating action and seeking
prompt resolution. "There are some things we
need not for tomorrow but for yesterday … so
let's do it," he urged the mining ministry in
reference to a local complaint.

"I don't like to discuss good ideas but
implement them," he said at another point. "An
administration that has been re-elected has no
excuse not to solve problems."

Finding solutions

There is certainly no shortage of problems for
Mr Uribe to try to solve, above and beyond the
security issue. Nearly half the population
lives under the poverty level; he wants to
bring the percentage down to 35% by 2010.
Rapid GDP growth presents its own problems,
such as pressure on inadequate and outdated
infrastructure. "We had in mind for the
country to grow at 2%-3% but when it began to
grow at 5%, and looking at 6% next year,
[roads, ports, etc] overflow and everything is
too small," Mr Uribe told the audience in
Medellín. "The government has to get on step."

The business and regulatory environment, while
decent, still needs fine-tuning. The corporate
tax rate is among the highest in Latin
America, although some relief is on the way: a
bill working its way through Congress would
reduce the rate from 38.5% to 32% and simplify
the tax code. "Colombia has been reluctant to
use tax as a driver for growth," the president
admitted. "But experience has shown that the
tax element plays an important role in
investment."

A more dramatic rate reduction might catch
more international investor attention,
however, and some existing investors grumble
that the reform is not ambitious enough. But
Mr Uribe is only willing to go so far. Tax
reform, he argued, should stimulate growth but
also be structured in such as a way as to
create sustainable growth for the long term.
The tax-cutting policies of former US
president Ronald Reagan and former UK prime
minister Margaret Thatcher "had short-term
benefits but did not guarantee sustained
increases in growth", he said.

Before wrapping up the session, the president
asked for the minutes to be transcribed so he
could follow up on all the issues raised. He
summed up what had been discussed and stated
the action points. One gets the impression
that he will check that they have been
resolved.

Irrevocable change

One valid point of concern is, if Colombia's
resurgence is in such large part down to one
man, what will happen when he leaves office?
Yet many foreign observers believe that the
country has changed irrevocably and, now that
people have had a taste of security and
stability, and got a glimpse of a brighter
future, there is no turning back.

"Colombians have confidence in themselves,
they have taken charge of their destiny," says
Frederick Felder, executive vice-president of
Greystar Resources, citing 2003 as the tipping
point. Canada-based Greystar halted a drilling
project in Bucaramanga, in north-east
Colombia, in 1999 because of security threats
but resumed work in 2003. The company now
employs 400 people in Colombia, 35 of them
professionals.

Political dynamic

The political dynamic has also changed, and
not only at the federal level. A younger, more
idealistic and yet pragmatic breed of
politicians has emerged, such as Antioquia
governor Anibal Gaviria Correa and Medellín's
charismatic jeans-wearing mayor, Sergio
Fajardo. Both enjoy astronomical approval
ratings and neither are career politicians:
the governor came from the private sector and
the mayor was a mathematician before entering
office.

Medellín is a sterling example of Colombia's
turnaround. Not all that long ago its murder
rate was among the highest in the world, but
Mr Fajardo says the city has undergone a
"beautiful transformation": crime has been
reduced, public spaces refurbished, schools
improved and innovation encouraged. "Medellín
has a completely new perspective with regard
to itself," he says.

Resilience is a national trait, it seems.
Having learned to laugh in the face of danger
and to look on the bright side of life during
the dark days of the past, Colombians have a
naturally sunny disposition coupled with a
strong sense of self-reliance –
characteristics that serve them well in
business.

The 'people are our greatest asset' line is
usually more tired than true, but in the case
of Colombia, it is backed up by testimonial
after testimonial. Each of the several
multinational CEOs and managing directors that
were interviewed in Bogotá and Medellín agreed
unequivocally that human capital is Colombia's
greatest advantage. Colombians make excellent
employees, and the country is seen as fertile
breeding ground for international management
talent.

"I have worked in many places around the world
and have never had employees as educated,
smart, professional, hardworking, passionate
and loyal as in Colombia," says Karl Lippert,
president of Bavaria, a subsidiary of
beverages giant SAB Miller and Colombia's
largest foreign investor.

Tourism promotion

If efforts to promote tourism pay off, more
foreigners will get to know Colombians'
positive attributes. It has been a struggle,
says Juan Salazar, director of ProExport
Colombia in London, just to get Colombia
included in travel agency brochures. But minds
are being changed and the tourists are
starting to come.

Patrick Vaysse, director of operations for
Colombia, Ecuador, Venezuela and Central
America for French hotel group Accor, says
Colombia will be one of Latin America's
biggest growth markets for tourism over the
next few years. Accor has been in Colombia for
a decade and has four high-end hotels under
the Sofitel brand, but is looking to add 10
economy hotels under its Ibis brand to
capitalise on increased tourist visits and
convention traffic.

Of course, for hotel and other investors, the
size of the opportunity must always be weighed
against the level of risk. This interesting
but long-ignored market holds the promise of
more than 40 million consumers with burgeoning
spending power, an abundance of clever
workers, and a flair for business and
entrepreneur ism. The opportunity is
undeniable. What, then, of the risk?

Safety issues

Control Risk's Mr Linsker says there are still
parts of the country that he would not
recommend to his corporate clients, but "the
general feeling of security has improved",
especially in the cities. Bogotá and Medellín
are safer these days than Caracas, the
Venezuelan capital, and Mexico City, he says.

"Security should not put off companies,
because the political environment offers all
the safeguards foreign investors need."
Security, in any case, is a fixed cost and
security-related risks are manageable, in
contrast to political risks elsewhere on the
continent. "The cost of the risk of
expropriation in Venezuela, for example, is
much higher than the cost of kidnap
precautions in Colombia," he says.

Crucially, Colombia lacks the anti-capitalism,
anti-gringo fervour and populist proclivities
of some of its neighbours, and has stronger,
more stable institutions, he says.

Overall, Mr Linsker reckons "Colombia is a
good bet" and, despite perception, a safer bet
than many other Latin American countries.
"With appropriate risk mitigation strategies
in place, Colombia is a very good place to do
business," he says.

Francisco Santos, vice-president of Colombia
and president Álvaro Uribe's right-hand man,
is reputed to be outgoing and informal, and on
this score he does not disappoint.

Rather than stuffy handshakes, visitors to his
Bogotá offices adjacent to the presidential
palace – female visitors, at least – receive a
kiss on the cheek and a good dose of Latin
charm. A graduate of the University of Texas
and former editor of El Tiempo
newspaper, he chats amiably about American
football and southern US rock music and gives
local restaurant recommendations.

His mood is jovial and confident, reflecting
the national mood. "We have got the upper hand
on criminality and these criminal groups," he
says. Like most other Colombians, he is
conscious of international perception and
eager to disavow lingering stereotypes.

"Colombia is a little jewel that is hidden.
People come here and think they will see
shoot-outs in the street and kidnappings on
the next block. Then they realise we actually
live pretty normal lives." For those who dare
to discover this jewel, he points out, "there
is a lot of money to be made".

While some of its Latin neighbours become less
stable and as their institutions come under
threat, Colombia – long considered the
riskiest – has come out the other side, Mr
Santos says. "We have been there, done that.
We are now seeing an inverse curve."

This presents a rare chance for Colombia,
which has been under invested because of
security problems, to re-engage with the
global business community. "We are not ashamed
to say we are pro-business. We are reducing
red tape, pursuing sound macroeconomic
policies and are very aggressively searching
for new markets," Mr Santos says. "We have
completed free trade agreements with Central
America and the US, are negotiating one with
Chile, and after four years of knocking on the
door of the EU, the Andean Community has
signed an association agreement."

He says all levels of government are working
hard to improve Colombia's image and to
promote inward investment. As a result,
companies "are looking at a country they had
totally discarded before". He cites the
example of General Electric, which had given
up on Colombia after one of the company's
executives was kidnapped and killed in the
1990s, but which has now returned after
vigorous wooing.

"From the president all the way down, we have
become sellers of Colombia," says Mr Santos.
What they have to sell is "a country with the
third largest population in Latin America,
with a stable democracy, stable rules, strong
institutions and a drastically improved
security situation, and which offers huge
opportunities for foreign investors".

The size and scope of these opportunities will
expand as security continues to improve, with
which the government is pressing ahead, Mr
Santos says, despite the major gains already
achieved in a relatively short amount of time.
"We are pretty excited about the results of
the past four years but there is still a long
way to go. We need to consolidate the security
situation and improve security in remote,
rural areas and diminish the areas where [the
criminal] groups operate. And second, we need
to improve security in urban areas. Most of
our cities have homicide rates that are lower
than others in Latin America but we still have
problems with common delinquency crimes."

The focus on individual street crimes is
itself a positive indication of how far
Colombia has come. If he had been told four
years ago that the government would have the
luxury of worrying about such low-level crime,
Mr Santos says, he never would have believed
it. "We underestimated the capability of the
police and army, and overestimated the
capability of the bad guys. The criminal
groups are on the defensive. They are seeing
diminishing returns, to use an economic term."

But now Mr Santos has an important question
for his interviewer: "Have you had any
empanadas since you have been in Colombia?" he
wants to know. An answer in the negative
elicits an impromptu invitation. "Come on," he
says. "Let's go for a snack. I know a good
place."

While some foreign companies are rediscovering
Colombia, or discovering it for the first
time, Unilever has been around all along.
"We've been here for more than 40 years so we
are obviously believers in the country," says
Sigfredo Valle Courtade, president of Unilever
Andina, in an interview at the Bogotá offices
that serve as the company's Andean region
headquarters. "Colombia may have its
difficulties, but there are difficulties
anywhere."

Security is not a major concern, he says. "We
take the usual security measures you would
take in any large or congested city – less
even than in other places," he says.

Colombia, where Unilever employs 1500 people,
is the company's largest market in the Andean
region. "When one thinks of investing in Latin
America, Colombia comes at the top of the
list," says Mr Valle.

In addition to the Bogotá corporate office,
the UK-based consumer goods company has
manufacturing facilities in Bogotá and Cali
(producing such products as toilet and laundry
soaps, shampoos and food items), and a
national distribution centre in Cali. Most of
Unilever's brands sold in Colombia are market
leaders, and those that are not are "fighting
number twos", Mr Valle says. But rising
purchasing power among Colombian consumers
means there is still scope for higher revenues
and business expansion.

A free trade agreement with the US may entice
competitors into the Colombian market, but Mr
Valle says that is fine with Unilever. In the
long run, more investment will create more
employment, which will further boost
purchasing power and therefore